Supply Chain Security

Mindful of how disasters like Japan’s earthquake and tsunami and Thailand’s floods disrupted business supply chains, the White House recently released a national strategy aimed at making an organization’s global supply chains more secure and resilient.

The six-page document encourages companies to identify threats early and plan accordingly in a cost-efficient way. Among its stated goals are strengthening the security of physical infrastructures, conveyances, and information assets by using layered defenses and integrating security into supply chain processes.

Many businesses don’t believe that the threat justifies a national strategy, and they fear that it will lead to more regulation at an economically vulnerable time. The White House says that it’s not an either-or proposition. “We reject the false choice between security and efficiency and firmly believe that we can promote economic growth while protecting our core values as a nation and as a people,” President Obama wrote in the letter accompanying the strategy.

Eric Holdeman, who runs an emergency management consultancy and blogs about maritime security at Emergency Management magazine, says that any efforts to improve resiliency will be looked upon by maritime stakeholders as a burden. “Everything now is about cost, cost, cost,” says Holdeman. “Anything that increases costs or slows down the process would be seen as a drag on the system.”

Carlos Velez, global security director for Johnson & Johnson, disagrees with that mindset and says that security improves profitability in the long run. “In terms of investment, any dollar invested in security will have a return on investment in the cost of insurance premiums, avoiding recalls, and maximizing the efficiency of the entire supply chain,” says Velez, who is also vice chair of the ASIS International Supply Chain and Transportation Security Council.

The problem isn’t really the White House strategy framework. Rather, it is a company’s fear of cumbersome implementation requirements and overlapping government actions.

J.J. Coughlin, director of law enforcement services for LoJack Supply Chain Integrity and chairman of the Southwest Transportation Security Council, already counts at least four major legislative efforts affecting supply chain stakeholders and at least 14 other strategies. The problem is “there’s so much redundancy,” says Coughlin, a member of the ASIS Supply Chain and Transportation Security Council.

Seth Stodder, former director of policy and planning for U.S. Customs and Border Protection and now a consultant working on the strategy for the Department of Homeland Security (DHS), says that he understands the industry’s fears, which is why DHS is reaching out to private supply chain stakeholders before the strategy evolves into an implementation plan.

“Part of the reason to go and talk through all of this with the private sector ... is to try and cut down the weeds a little bit,” he says. “There are areas where there are overlapping regulations and duplication, and this is an opportunity to take an inventory of everything we’ve done for the last 10 years and say, ‘This works, this doesn’t, this is duplicative.’”

Stodder says the idea is to find ways to consolidate and streamline regulations to make it easier on supply chain stakeholders, who are overwhelmingly private sector. “Nobody in the government wants to slow down commerce,” he says.

However, the federal government does want to ensure that disruptions—whether man-made or natural—don’t block the “carotid artery of the global trading system” and paralyze it. This happened in 2002 when the West Coast port shutdown led to the stoppage of all trans-Pacific trade for 10 days because of a labor dispute.

Although skeptical of the strategy, Coughlin does have a suggestion for the federal government if it wants to help create a safer and more secure supply chain: concentrate on sharing relevant threat information with stakeholders. “The government doesn’t do this very well, because the government thinks everything is a secret,” he explains.

The White House strategy lists as one goal the need to refine government understanding of threats and risks associated with the supply chain, but it’s silent on whether a better understanding of those threats and risks would be shared with stakeholders.

Stodder says the government has gotten better about sharing best practices with industry, but he acknowledges that stakeholders still don’t get the actionable intelligence they crave. “It’s a consistent theme,” he says, and a problem that government will need to address.

And that’s important because Holdeman says terminal managers, shippers, and port directors, in his experience, have become skeptical of threats that involve the global supply chain. “They don’t think an attack is ever going to happen and see all the money that’s being expended as just plain overhead and a waste,” he explains.

After DHS finishes its outreach to private and international stakeholders, it will begin to work that feedback into the strategy’s implementation plan, which is due January 2013.

Supply Chain Standard

ASIS International is currently developing a standard for Resilience in the Supply Chain, which would extend the scope of the Resilience Standard. To learn more about these standards, go to www.asisonline.org/guidelines/guidelines.htm